Supply Chain Research

The European Commission is preparing a plan to offer the U.S. a broad trade deal in return for a permanent exclusion from section 232 duties on steel and aluminum, Politico reports. The EU currently has a temporary exemption that runs out on May 1, as outlined in Panjiva research of March 21, and has so far taken a hawkish stance to retaliatory duties. The deal would likely focus on lower goods tariffs on both sides, rather than the broader TTIP arrangement negotiated with the Obama administration.

Panjiva data shows European suppliers may not have planned on the exemption or its continuance, with U.S. imports having fallen 8.2% in the three months to February 28 sequentially. That compared to 1.6% for all U.S. imports of the products covered, while the EU accounted for 16.3% of the total in the past 12 months.

Chart segments U.S. imports of steel and aluminum products covered by the section 232 review by region of origin. Source: Panjiva

One sticking point to negotiations may be the potential hostility of President Trump towards the European automotive industry. According to S&P Global Market Intelligence the President has repeated his views that the trade deficit America holds vs. the U.S. represents a loss (even though the deficit is simply an accounting identity) and that the automotive sector is to blame.

That follows something of a renaissance among EU automotive exports to the U.S. Seaborne shipments expanded 9.2%% on a year earlier in the first quarter. That may represent, however, a rush by shippers led by BMW, Daimler and Volvo to avoid duties, though U.S. sales growth of 4% in March provides fundamental support to the growth too.

Chart shows U.S. seaborne imports of passenger vehicles from the European Union. Lower panel shows change vs. a year earlier. Source: Panjiva